Tax Permits

If you own a business in California that sells cannabis and/or cannabis products, you must register with the California Department of Tax and Fee Administration for a seller’s permit and regularly file sales and use tax returns. In addition to a seller’s permit, if you are a distributor, or microbusiness licensed to act as a distributor, of cannabis and/or cannabis products, you must register with the CDTFA for a cannabis tax permit and regularly file cannabis tax returns.

Sales and Use Taxes

In California, all retail sales of tangible personal property are taxable unless the law provides a specific exemption. The law defines tangible personal property as an item that can be seen, weighed, measured, felt, or touched. Cannabis and cannabis products are generally considered tangible personal property and without a specific exemption, sales of such property are subject to sales and use tax.

Please note, on November 8, 2016, California voters approved Proposition 64, Control, Regulate and Tax Adult Use of Marijuana Act. Proposition 64, among other things, provides that effective November 9, 2016, certain sales of medicinal cannabis are exempt from sales and use tax. For more information on how Proposition 64 affects your medicinal cannabis sales, please see the Retailers tab, under the heading, Proposition 64 Exempts Certain Medicinal Cannabis Sales.

Use tax may be due when you purchase taxable items without payment of California tax from an out-of-state vendor for use in California. You may owe use tax on items that you remove from your inventory and use in California if you did not pay tax when you purchased the items.

Cannabis Excise Tax and Cultivation Tax

Effective January 1, 2018, a 15 percent excise tax is imposed upon retail purchasers of cannabis and cannabis products. The 15 percent excise tax is calculated based on the average market price of the retail sale.

In addition, a cultivation tax on all harvested cannabis that enters the commercial market is imposed on cultivators at a rate of:

$9.25 per dry-weight ounce of cannabis flowers,

$2.75 per dry-weight ounce of cannabis leaves, and

$1.29 per ounce of fresh cannabis plant.*

*To qualify for the “fresh” plant category, the unprocessed cannabis must be weighed within two hours of harvesting.

Beginning January 1, 2020, the CDTFA is required to annually adjust the cultivation tax rates to account for inflation.

Registration

Online Registration — Register with CDTFA for your seller’s permit and a cannabis tax permit if applicable to your type of business. CDTFA’s registration system will prompt you when you select Register a business activity with CDTFA from Registration – Main Menu. If you currently hold a seller’s permit previously issued by the Board of Equalization, you do not need to re-register for a seller’s permit with the CDTFA.

Testing laboratory licenseissued by the Bureau of Cannabis Control within the California Department of Consumer Affairs

Notes

Collectives and cooperatives are generally retailers and must collect and pay sales tax. Before you start operating as a collective or cooperative, please contact us. You should also review the general provisions and definitions found in Revenue and Taxation Code section 6011.1 and section 6012.1. Please refer to footnote 2 for additional information.

The Cannabis Tax Law provides that any person required to be licensed as a cannabis retailer, cultivator, distributor, and/or manufacturer collect the excise or cultivation tax, and for a person required to be licensed as a distributor, to obtain a permit and pay the taxes to the CDTFA. Please review the Bureau of Cannabis Control’s (BCC) Collectives and Cooperatives Fact Sheet and contact the BCC and/or the California Department of Food and Agriculture, and/or the California Department of Public Health to determine your cannabis licensing requirements.

A seller’s permit is only required if you make sales of tangible personal property, including cannabis and/or cannabis products.

Cannabis testing facilities are not allowed to sell cannabis or cannabis products. If you sell other tangible personal property, such as testing kits, you are required to register for a seller’s permit.

No Seller’s Permit Required – Obtain Certification Letter

If you do not sell tangible personal property in California, you are not required to hold a seller’s permit. However, to meet the commercial cannabis licensing application requirements, a certification letter must be provided to the licensing agency stating that a seller’s permit is not required. To receive a certification letter from the CDTFA, please email us with the following information:

Owner name,

DBA,

Business address,

Contact name,

Contact phone number, and a

Description of your business activities

Upon receipt of your email, the CDTFA will review your information and, if sufficient information is provided, a certification letter will be mailed to the address provided. You will be contacted if additional information is needed.

Filing and Payments

Sales & Use Tax Return

As a cannabis seller, you are required to file regular sales and use tax returns to report your sales. Whether you are new to operating a cannabis business or growing your existing business, you’ll find these tools helpful in maintaining your account with us.

Cannabis Tax Return

As a distributor of cannabis and cannabis products, you are required to electronically file your cannabis tax return with the CDTFA. The cannabis tax return is due on the last day of the month following the reporting period. The cannabis tax account is separate from other accounts you may have with the CDTFA.

Cash Payments

If you are paying your sales and use tax or cannabis tax in cash, please contact one of our offices to make arrangements and explain that you need an exemption from the No Cash policy.

We may grant an exemption if paying in cash is necessary to avoid an undue hardship. Our staff will provide you with a No Cash Exemption Request form. On this form you will need to describe the nature of your business and why you are unable to establish a bank account or pay by cashier’s check or money order. You will be notified in writing when your request has been approved or denied and you will be provided with additional information on how to proceed.

If you receive approval to pay in cash, you must call your local office for an appointment to make your payment at least three days in advance. Please see our Cash Payment Instructions for more information.

If you have an estimated monthly tax liability over $20,000 for cannabis tax accounts or $10,000 for sales and use tax accounts, you are required to pay any amounts due by electronic funds transfer (EFT). If you do not pay electronically, you will be subject to a 10 percent penalty. Receiving approval to pay in cash may exclude you from the EFT requirement. However, if you believe you were assessed a penalty in error, you can request relief of the mandatory EFT penalty online.